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Property insurance on the rise in Florida

By James Call

Tallahassee, FL – Floridians can expect the cost of homeowners insurance to go up. A sweeping property insurance bill passed by the Legislature this year eased regulations imposed after the hurricanes of 2004 and 2005 when premiums in some cases doubled. James Call prepared this report.

Robert Simmons is the attorney for two All State subsidiaries offering property insurance in South Florida.

"Castle Key Insurance and Castle Key Indemnity offers insurance to some 266,000 through our 800 insurance agents and their 2,300 support staff."

He led a team of actuaries in presenting a case to regulators for a double digit increases in premiums.

"We are requesting approval for a 31.4 percent increase for Castle Key Insurance Company and 35.5 percent for Castle Key Indemnity."

During the nearly two hour hearing both Castle Key and the Office of Insurance Regulation's consumer advocate presented charts and graphs detailing calculations for expenses. The consumer advocate, Steve Alexander, represents the public in the proceeding to make sure rate hikes are justified. He testified the company's request may be too low. Belinda Miller is the acting general counsel for the Office of Insurance Regulation and wanted to make sure she heard Alexander correctly.

Miller: "So would you recommend that we approve the indemnity company for 46.9 percent?"

Alexander: "No I agree with the company that it should be in phased in and I think what they selected is reasonable given the indication is so much higher than what they selected."

The two companies are the 6th and 7th largest property insurers in the state, covering 5 percent of the market. And industry experts and regulators say they are at the head of a line of insurers looking for rate increases. When companies want to increase rates they have to present their reasons at a hearing conducted by Belinda Miller.

"It's not in the public interest to keep rates artificially low because then you end up with an insolvent company and nobody wants that. But on the other hand you don't want a company making extraordinary profit and it's because their rates are too high. It is a balance and it is a constant balance. Not once but in every year."

It's been a tough five years for Florida property insurance companies. Although no hurricane has come ashore in the state they have weathered a combination of factors that will lead to homeowners paying higher premiums. Industry experts say first on the list is former Governor Charlie Crist. In his first month in office in 2007 he persuaded the Legislature to roll back rates and freeze them for three years.

In that same time period, damage claims for sinkholes in central and south Florida increased dramatically. And the Great Recession drastically affected investment income for insurers. These factors produced a storm that put at least six companies into bankruptcy and dried up the reserves insurers keep on hand to pay damages when a catastrophe does hit; as recently as 2004, companies would hold seven-billion dollars in reserves. Today, a more common amount is two-billion.

The companies' fortunes changed this year. Lawmakers passed an industry supported bill to help build up reserves. It limits when consumers can file claims and allows companies to charge customers for expenses without interference from regulators. A similar bill was vetoed last year by former governor Crist. This year, Governor Rick Scott signed it. Sam Miller is the executive director of the Florida Insurance Council.

"Every major policy maker in Florida but Governor Crist supported the big cost- driver bill. Commissioner McCarty asked that he sign it, then Governor Crist chose to veto that bill. And it just put us another year behind trying to do something about these questionable claims that cause rates to go up so we finally did pass Senate Bill 408 during the just included session."

Consumers groups fear the time limit on when claims can be filed and the procedures governing when homeowners will be compensated will lead to some people not being paid. They also questioned the fairness of allowing companies to increase premiums up to 15-percent a year related to reinsurance, insurance for insurers. Industry advocates say given the state of the property insurance industry in Florida the reforms were needed to keep companies in business. In any event, the state's chief regulator, Belinda Miller expects many insurance companies to file for rate hikes.

"We are going to see a rate increase from most P-and-C companies this year. They file every year. And we are going to see some requests this year. My guess is once they finalize their reinsurance programs we will also see additional requests."

Miller says the Castle Key companies and customers should know in about two weeks whether the companies' requests for rate hikes of more than 30 percent are approved.